California Mandates Pay Data Reporting, Tightens Pay Equity & Transparency Rules

The California State Legislature has recently passed two significant pay-related bills, both awaiting the Governor’s signature. One bill focuses on pay transparency and equal protection, prohibiting employers from inquiring about salary history, requiring large employers to disclose pay ranges in job postings, and strengthening safeguards against discrimination based on gender, race, and ethnicity.

The other bill mandates that private employers with 100 or more employees annually submit pay data reports—disaggregated by race, gender, and job category—to the Department of Civil Rights, while enhancing privacy protections and enforcement mechanisms.

For tailored advice on California labor compliance and union-related risk management, please contact ILS Partner, Ted Wells, at contact@consultils.com.

SB 642 Pay Equity Act

California's SB 642 Pay Equity Act strengthens pay transparency requirements and equal pay protections for workers. The law prohibits employers from asking about salary history, requires pay scale disclosures in job postings for larger employers, and reinforces protections against wage discrimination based on sex, race, or ethnicity. These changes aim to promote fairer compensation practices across California workplaces.

This bill updates California's Labor Code to increase pay transparency and strengthen equal pay protections. It includes the following rules for employers:

Pay Transparency Rules (Applies to All Employers, Including Government Agencies)

• Can’t ask about salary history: Employers cannot ask about or use salary history when deciding whether to hire someone or what to pay them. This helps prevent past underpayment from following workers throughout their careers.

• Can ask what pay an applicant wants: Applicants can voluntarily share their salary history if they choose, and employers can ask about salary expectations.

• Must provide “pay scale” information: Employers must provide pay scale information when applicants or current employees request it. Companies with 15 or more employees must include pay scales in all job postings, including those published through third parties. The "pay scale" means the salary or hourly wage range the employer reasonably expects to pay.

• Penalties for pay discrimination: Employers must keep wage records for each employee during their employment plus three years after, allowing the Labor Commissioner to spot patterns of pay discrimination. The Labor Commissioner can investigate complaints and issue penalties from $100 to $10,000 per violation, though first-time offenders can avoid penalties by fixing their job postings. Workers can also sue for injunctive relief.

Equal Pay Protections

The bill reinforces California's ban on paying different wages based on sex, race, or ethnicity for substantially similar work.

• Must have business-related reason for wage differences: Wage differences are only allowed for legitimate reasons like seniority, merit systems, production output, or job-related factors such as education or experience—and these factors cannot be rooted in discrimination.

• Salary history alone can’t justify wage differences: Past salary cannot justify pay gaps, though employers can consider a current employee's existing salary if the difference is based on legitimate factors.

• Employees allowed to discuss wages: Employees cannot be punished for discussing their pay.

• Employees allowed to assert their rights: The law protects workers from retaliation for enforcing their rights.

• Penalties for unjustified pay disparity: The Division of Labor Standards Enforcement investigates violations, and employees can sue to recover unpaid wages, interest, and liquidated damages. Together, these changes push California employers toward greater pay equity and transparency.

Impact on Employers

• SB 642 creates significant compliance obligations for California employers. Companies must review and update their hiring practices to eliminate salary history inquiries, revise job postings to include pay scales, and establish systems to track and justify any wage differences among employees performing substantially similar work.

• Employers with 15 or more employees face additional requirements around public posting of pay ranges. Non-compliance can result in penalties ranging from $100 to $10,000 per violation, along with potential lawsuits from employees seeking unpaid wages and damages.

  
  

What Employers Should Do

• Employers should take proactive steps to comply with these requirements. Review all job application materials and train hiring managers to avoid asking about salary history. Develop clear pay scales for all positions and ensure they are included in job postings if you have 15 or more employees.

• Conduct a compensation audit to identify and address any unjustified pay disparities based on sex, race, or ethnicity. Update employee handbooks to reinforce workers' rights to discuss wages and file complaints without retaliation.

• Finally, maintain detailed wage records for current employees and for three years after employment ends.

SB 464 California Employer Pay Data Reporting Requirements

California's SB 464 requires private employers with 100 or more employees to submit annual pay data reports to the Civil Rights Department. These reports break down workforce demographics and compensation by race, ethnicity, sex, and job category. Recent updates expand reporting categories, strengthen data privacy protections, and make enforcement penalties mandatory rather than discretionary. The law is designed to help identify patterns of pay inequity while keeping individual company data confidential.

This bill updates pay data reporting requirements for private employers with 100 or more employees.

Reporting Requirements

Employers with 100 or more employees must file annual pay data reports with the Civil Rights Department by the second Wednesday of May.

Companies using 100 or more workers through labor contractors file a separate report and must disclose the contractors' names.

Reports include employee counts by race, ethnicity, and sex across job categories and federal pay bands, along with median and mean hourly rates for each group. Employers take a "snapshot" of all employees during one pay period between October 1 and December 31, then report total W-2 earnings for the full year.

What's Changing

• Data Privacy: Demographic information collected for these reports must be stored separately from regular personnel files.

• More Job Categories: Starting January 1, 2027, reporting categories jump from 10 to 23. Instead of broad categories like "professionals" and "managers," employers will report more specific groups like chief executives, computer occupations, healthcare practitioners, legal occupations, and transportation workers.

• Tougher Enforcement: Courts now must impose penalties when the Civil Rights Department asks—no longer optional. First-time violations cost $100 per employee, repeat violations $200 per employee.

• Confidentiality: Individual company data stays confidential and isn't subject to public records requests. The Civil Rights Department can only publish aggregate reports that don't identify specific businesses. Reports are kept for at least 10 years and can be used in equal pay and discrimination investigations.

Impact on Employers

• SB 464 adds substantial administrative work for covered employers. HR teams need to collect and organize detailed demographic and pay data across expanded job categories, maintain separate storage systems for sensitive information, and meet strict annual deadlines.

• The mandatory penalties mean there's no room for error—missing or incomplete reports trigger automatic fines that scale with company size.

• For employers with multiple locations, the burden multiplies since each site requires its own filing. Companies that rely heavily on labor contractors face extra complexity in tracking and reporting that workforce separately.

What Employers Should Do

• Start by confirming whether you meet the 100-employee threshold and identifying all locations that need separate reports.

• Set up your data collection systems now, especially if you'll be subject to the expanded 23-category reporting starting in 2027.

• Create a separate, secure storage system for demographic data that's isolated from your regular personnel files.

• Assign clear responsibility for the annual May deadline and build in buffer time for data validation.

• If you use labor contractors, establish a process to track those workers and collect contractor information for your separate report.

• Consider running a practice report to spot gaps in your data before the actual filing deadline.

These reporting requirements push California toward greater visibility into pay practices, giving regulators the data they need to spot systemic inequities.

Employers with multiple locations must file separate reports for each one.

Employers should act now to stay ahead of these new rules: review hiring practices and job posting templates to ensure pay range compliance, and build or refine systems for collecting and analyzing pay data by race, gender, and job category while safeguarding privacy. Early preparation not only reduces compliance risks and potential penalties but also shows a strong commitment to fairness and transparency, strengthening your employer brand and competitiveness.

For tailored advice on California labor compliance and union-related risk management, please contact ILS Partner, Ted Wells, at contact@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Partner and Head of Litigation at ILS, Ted brings over a decade of experience handling complex commercial, employment, and wage-and-hour disputes for businesses. He has successfully represented clients before federal and state courts as well as private arbitration panels, achieving major wins that include multimillion-dollar jury verdicts, high-value settlements, and multiple pre-trial dismissals.

Before joining ILS, Ted represented both plaintiffs and defendants in civil rights, constitutional, and employment litigation. He worked alongside a retired Missouri Court of Appeals judge and assisted a U.S. magistrate judge during law school. This dual-sided, trial-to-appeal experience gives him a unique perspective to craft cost-effective, strategic solutions for clients.

Email:  contact@consultils.com | Phone: 626-344-8949